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The Evolution of the Airline Industry - Steven Morrison

The Evolution of the Airline Industry

Paperback Published: 1st October 1995
ISBN: 9780815758433
Number Of Pages: 188

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Since the enactment of the Airline Deregulation Act in 1978, questions that had been at the heart of the ongoing debate about the industry for eighty years gained a new intensity: Is there enough competition among airlines to ensure that passengers do not pay excessive fares? Can an unregulated airline industry be profitable? Is air travel safe? While economic regulation provided a certain stability for both passengers and the industry, deregulation changed everything. A new fare structure emerged; travelers faced a variety of fares and travel restrictions; and the offerings changed frequently. In the last fifteen years, the airline industry's earnings have fluctuated wildly. New carriers entered the industry, but several declared bankruptcy, and Eastern, Pan Am, and Midway were liquidated. As financial pressures mounted, fears have arisen that air safety is being compromised by carriers who cut costs by skimping on maintenance and hiring inexperienced pilots. Deregulation itself became an issue with many critics calling for a return to some form of regulation. In this book, Steven A. Morrison and Clifford Winston assert that all too often public discussion of the issues of airline competition, profitability, and safety take place without a firm understanding of the facts. The policy recommendations that emerge frequently ignore the long-run evolution of the industry and its capacity to solve its own problems. This book provides a comprehensive profile of the industry as it has evolved, both before and since deregulation. The authors identify the problems the industry faces, assess their severity and their underlying causes, and indicate whether government policy can play an effectiverole in improving performance. They also develop a basis for understanding the industry's evolution and how the industry will eventually adapt to the unregulated economic environment. Morrison and Winston maintain that although the airline industry has not reached long-run equilibrium, its evolution is proceeding in a positive direction--one that will preserve and possibly enhance the benefits of deregulation to travelers and carriers. They conclude that the federal government's primary policy objective should be to expand the benefits from unregulated market forces to international travel. Brookings Review article also available

Introductionp. 3
A Profile of the Airline Industryp. 6
Industry Structurep. 7
Faresp. 11
Service Qualityp. 19
Profitsp. 28
Safetyp. 31
Implicationsp. 33
Appendixp. 34
Organizational and Methodological Overviewp. 39
Airline Behavior and Traveler Welfarep. 43
Impediments to Competitionp. 43
Patterns of Price Leadershipp. 67
The Welfare Cost of Fare Restrictionsp. 78
Summaryp. 82
Appendixp. 83
Airline Profitabilityp. 90
The Cost of Forecast Errorsp. 91
The Determinants of Individual Airline Profitabilityp. 96
Bankruptcy, Multimarket Contact, and Industry Profitabilityp. 105
Conclusionp. 115
Appendixp. 116
Industry Evolutionp. 128
Airline Fares and Market Entry and Exitp. 128
The International Dimensionp. 147
Toward Long-Run Equilibriump. 150
Conclusionp. 154
Appendixp. 154
Policy Implicationsp. 159
Government Interventionp. 160
Infrastructurep. 160
Open Skiesp. 162
Conclusionp. 162
Indexp. 164
U.S. Scheduled Airline Enplanements, Passenger Miles, Revenues, and Employees, Selected Years, 1926-93
Enplanements, Passenger Miles, Average Length of Haul, and Revenue, by Major Carrier, 1993
U.S., North American, and World Airline Industry Average Fares per Passenger Mile (Yield), 1969, 1980, 1990, 1991
Operating Profit Margins, Selected Airlines, 1970-93
Share of Enplanements of the Dominant Carrier at Concentrated Hub Airports, 1978, 1993
Airline Choice Model Estimates
Estimated Change in Market Share from Elimination of All Frequent Flier Programs, by Airline, 1990
Change in Market Share If One Carrier's Frequent Flier Program Were Eliminated While Other Carriers Maintained Their Programs, 1990
Computer Reservation System Ownership
Effects of Computer Reservation Systems' Bias on Traveler Welfare and Airline Revenues
Effects of Computer Reservation Systems' Bias on Distribution of Revenue among Airlines, Base Case
Share of Airline Competitive Pairs in Which One Airline Has Caused Another's Fare (Causality), Base Case with Average Fare, 10 Percent Significance Level, One Lag, 1978-91
Extent of Causality Airlines Have at Their Hubs and Overall, by Airport, 1978-91
Probit Analysis of Factors Affecting Causality, by Airline
Factors Influencing Fares
Factors Influencing Traveler Choice of Airline Ticket
Annual Gains to Travelers from Airline Deregulation
Results of Tests for Unit Roots for Average Fare
Share of Causality Tests Exhibiting Granger Causality, Sensitivity of Findings
Estimated Effects of Airline Industry Factors and Other Factors on Airlines' Annual Rates of Return, 1970-88
Average Annual Changes in Three Least Profitable Airlines' Profits If They Had Characteristics of Three Most Profitable Airlines, 1980-88
Estimated Effect of Airline Bankruptcies on Industry Revenue, by Bankrupt Airline, 1983-93
Estimated Effect of Airline Bankruptcies on Revenues, by Airline Affected
Estimated Effect of Bankrupt Airlines, by Occurrence, on Revenue of Three Healthy Airlines
Estimated Effect of Bankrupt Carrier on Fares of Three Healthy Carriers and Share of Healthy Carriers' Revenue in Markets Where They Compete with Bankrupt Carriers
Effect of Individual Multimarket Contact on Airline Revenue, by Airline, 1992
Effect of All Multimarket Contact on Airline Revenue, by Airline, 1979-92
Bankruptcy Regression Coefficients, by Carrier
Effect of Bankruptcies on Airline Industry Profits
Multimarket Contact Regression Coefficients, by Airline
Estimated Effects on an Airline's Fare of the Presence of Another Airline on a Given Route
Estimated Determinants of an Airline's Decision to Provide Direct Service on a Given Route
Estimated Determinants of an Airline's Decision to Exit a Given Route
Estimated Change in Fares, Airlines per Route, and Market Shares When One or More Airlines Exits the Industry, by Airline, Twenty Quarters after Exit
Estimated Change in Fares, Airlines per Route, and Market Shares Caused by Selected Mergers, One and Twenty-One Quarters after Merger
Estimation Results of Fare Equations, by Airline
Sensitivity Tests of Simulation Results
Airline Industry Effective Competitors, National Level, 1978-93
Airline Industry Effective Competitors, Route Level, 1978-93
Domestic Airline Average Fare per Passenger Mile (Yield), 1970-93
Airline Industry Average Fare per Passenger Mile (Yield), Actual under Deregulation and Projected under Regulation, 1978-93
Distribution of Fares Travelers Paid Relative to Their Route's Average Fare, Fourth Quarter 1978, 1985, 1993
Effect of an Additional Competitor on the Spread of Airline Fares on a Route, Fourth Quarter 1978 to Fourth Quarter 1993
Change in Domestic Air Fares, by Route Distance, Fourth Quarter 1978 to Fourth Quarter 1993
Distribution of Domestic Air Fares Relative to Projected Regulated Fares, Fourth Quarter 1993
Share of All Passengers on Domestic Flights Who Needed to Make Connecting Flights, 1978-93
Excess of Actual Distance Flown over Shortest Possible Distance to Destination, Domestic Trips, 1978-93
Change in Components of Total Flight Time, Domestic Flights, by Flight Distance, 1978-93
Change in Components of Total Flight Time, Domestic Flights, 1978-93
Share of Airline Seats Filled by Paying Passengers (Load Factor), 1970-93
Share of Airline Seats Filled by Paying Passengers, by Distance, Domestic Flights, 1978, 1993
Scheduled Airline Operating Profit Margin for Domestic and International Services, 1970-93
Chance of Death per Million Air Carrier Departures, 1975-93
Yield Premiums at Fifteen Concentrated Hub Airports under Two Methods of Determination, 1978-93
Predicted GDP Minus Actual GDP, Eight-Year Lag, Two-Year Lead, 1950-93
Change in Airline Industry Average Fares Caused by Multimarket Contacts, 1979-92
Estimated Effects of Multimarket Contacts on Fares, 1979-92
Connecting and Direct Routes Served, Southwest Airlines, 1979-93
Connecting and Direct Routes Served, American Airlines, 1978-93
Connecting and Direct Routes Served, USAir, 1978-93
Connecting and Direct Routes Served, Delta Airlines, 1978-93
Connecting and Direct Routes Served, United Airlines, 1978-93
Estimated Effect on Fares of Exit from Airline Industry by Continental, America West, and TWA
Indexes of Real Revenues and Costs per Revenue-Ton Mile, 1970-93
Table of Contents provided by Syndetics. All Rights Reserved.

ISBN: 9780815758433
ISBN-10: 081575843X
Audience: Professional
Format: Paperback
Language: English
Number Of Pages: 188
Published: 1st October 1995
Publisher: Brookings Institution
Country of Publication: US
Dimensions (cm): 23.5 x 15.88  x 1.27
Weight (kg): 0.25

Earn 118 Qantas Points
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